Plan to pipe Territory gas to Sydney has political backing, but will the billion-dollar pipeline eventuate?

The fear of an impending Sydney gas shortage has given new life to a proposed billion-dollar 1,000-kilometre Northern Territory pipeline.

Federal Industry Minister Ian Macfarlane recently spoke in support of the project, which also has the support of NSW Premier Mike Baird and NT Chief Minister Adam Giles.

But despite the political backing, energy experts have said the pipeline remains an uncertain proposition, contingent on future gas prices and unproven gas reserves.

Meanwhile, Sydney gas prices continue to rise, making the pipeline more and more economically feasible.

Experts have said gas would probably not flow before 2020 at the earliest — far too late to soften the NSW supply crunch forecast for 2016–17.

So could the Territory supply the eastern gas market? Or is this another pipedream?

Deloittes: Is the pipeline economically feasible?

The fate of the NT gas pipeline rests on whether Australians want to pay higher prices for long distance transportation of gas instead of extracting reserves closer to home, according to Deloittes national director of oil and gas Geoffrey Cann.

"My sense is the pipeline is driven in response to the inability of eastern Australia to access its own resources," he said.

A pipeline built and operating with customers on it by 2020 is practical outcome. It could be a little bit earlier – that would be nice. But realistically it would be a five-year timeframe. In reality we have to have customers and line up demand and supply.

Rob Wheals, APA Group manager

"From the vantage point of what is the best use of Australia's capital, the best response is to access the coal seam gas resources already in NSW and Victoria and further expand gas resources in Queensland."

Coal seam gas projects have been strongly opposed in Queensland, Victoria and NSW — typically by farmers and residents of nearby communities.

Chief Minister: Where would the gas come from?

Despite being a keen advocate of the project, NT Chief Minister Adam Giles admitted there was "not necessarily an available pool of gas reserves sitting there ready to turn the tap on right now".

"Building a pipeline is a bit like chicken and the egg," he said.

Gas would need to be sold to eastern states utilities and other consumers before the gas pipeline would be built. This capital would finance the pipeline.

But the offshore projects that could supply gas to the pipeline have already sold their gas overseas.

Quick facts on the pipeline:

What is behind the proposal? Fears of an impending gas shortage in NSW.

What would it cost? Anything from $900 million to $1.3 billion, according to Australia's largest pipeline owner, APA Group.

Where would it go? APA is looking at three potential routes: Alice Springs to Moomba (1,100km), Tenant Creek to Mt Isa (620km), and from midway between Alice and Tenant Creek to the Carpentaria Gas Pipeline (700km).

Where would gas come from? The Territory Government prefers developing onshore deposits. It says this would create jobs in remote areas. APA Group says more proven reserves have been identified offshore.

Taiwanese and Japanese utility companies have bought the first 15 years of gas production of the $33 billion Inpex project, which comes online in 2017.

That leaves undeveloped reserves, some of which would probably only be feasible if there was a pipeline to the eastern states — hence the "chicken and egg".

"What we're trying to do as government is encourage those energy purchasers, encourage the pipeline, but also encourage the gas upstream developers to get their product to market," Mr Giles said.

"They're the ducks that we need to line up."

One way out of the impasse would be for the NT Government to build the pipeline itself. But Mr Giles said it was not considering "any kind of financial incentive".

"We think it stacks up on economic grounds," he said. "We will seek to give it major project status."

The Northern Territory's onshore shale gas reserves would need to extracted through hydraulic fracking - the method of injecting pressurised fluid into a wellbore to fracture rock and make natural gas flow more freely.

It remains unclear whether fracking companies would encounter the same level of protest in the Northern Territory as they have done in Queensland, Victoria and New South Wales.

Mr Giles said he would prefer onshore gas development to offshore.

"Onshore means a higher level of infrastructure — roads and bridges and telecoms — being built in some of our more regional and remote areas," he said.

"It's an opportunity for jobs in regional and remote parts of the Northern Territory."

Pipeline owner: What would it cost to build?

APA group manager Rob Wheals said there were broadly three routes the pipe could take. The shortest route, from the NT to Mount Isa, would cost $900 million and the longest route, to Moomba in South Australia, would cost $1.3 billion.

"The construction side is the relatively quick part," he said.

"The approval side is always the slower part. You're working with multiple jurisdictions which would potentially slow that down.

"A pipeline built and operating with customers on it by 2020 is a practical outcome. It could be a little bit earlier – that would be nice.

"But realistically it would be a five-year timeframe. In reality we have to have customers and line up demand and supply."

APA is Australia's largest pipeline owner and already owns the Darwin to Alice Springs pipeline.

It decided in February to invest $2 million in studying the feasibility of linking its NT pipeline to the eastern grid.

Mr Wheals said the Northern Territory's onshore gas deposits are still at least five years from full development, and offshore projects with 60 TCF (trillion cubic feet) of identified reserves are more likely to deliver supply,

He envisioned APA building the pipeline to provide a "seamless service one-stop shop" for buying NT gas in the eastern states,

"The gas can be entered into the system in Darwin from an LNG project or development offshore," he said.

"We see part of value proposition is stitching all that together, much the same way as when you get on a train and buy a ticket to go from one point to another.

"We are looking to offer a similar sort of service to the customer whether they are a producer or end user."